Rückstellungen. German firms are required to make provisions for uncertain future obligations — pensions, warranties, litigation, maintenance not yet carried out. The money is set aside against a thing that has not happened yet and may not. The obligation to reserve arises from the possibility.
economics
The full cost calculation
German business education teaches Vollkostenrechnung — costing that carries every overhead through to the product, rather than looking only at the additional cost of one more unit. A decision taken on marginal cost looks better than it is. The German training insists on seeing what the thing actually consumes.
Yield management
American Airlines built the practice in the 1980s: the same seat on the same flight sold at many different prices depending on when it was bought, by whom, and under what conditions. It spread to hotels, car rental, cruise lines and events. An entire American industry is built on the proposition that a fixed price leaves money unclaimed.
The principle of unequal treatment
Das Imparitätsprinzip. The principle of unequal treatment. Risks and losses are booked when they become likely. Gains are booked only when realised. The asymmetry is deliberate and named. The German accounting system treats bad news and good news differently on purpose.
Hidden reserves
Stille Reserven. German commercial law permits hidden reserves — assets carried below their real value, so that value is available later if it is needed. International accounting standards prohibit their deliberate creation outright. German law treats them as prudence. The two systems disagree about whether understating your own strength is a virtue or a misstatement.
Short-time work
Kurzarbeit. When demand collapses, a German employer cuts hours rather than jobs, and the state pays workers around 60 percent of the wages lost — more for those with children.
A work-sharing scheme was first used by German miners as early as 1910. It flourished under the Weimar Republic, was written into employment promotion law by 1969, and was used again during reunification. In mid-2009 over 1.4 million workers and 63,000 employers were in it. In 2020 a study attributed 2.2 million saved jobs to it.
The IMF calls it the gold standard. The country built a permanent institution whose purpose is to make redundancy unnecessary.
Fair market value
The standard American legal definition, used in tax law and valuation: the price at which property would change hands between a willing buyer and a willing seller, neither under compulsion, both having reasonable knowledge of the relevant facts. The definition contains no reference to cost. Value is defined as the outcome of a hypothetical negotiation between two informed parties.
The prudence principle
Das Vorsichtsprinzip. Section 252 of the German Commercial Code requires that valuation be made prudently. Losses and risks are recognised as soon as they become probable. Profits are recognised only once realised. The principle exists to protect creditors, and it traces back to the first all-German Commercial Code of 1861.
The German balance sheet is built to understate.